0.55
1.45
1.82
0.45
Answer is Right!
Answer is Wrong!
The correct answer is A. 0.55.
The payout ratio is the percentage of a company’s net income that is paid out as dividends to shareholders. The retention ratio is the percentage of a company’s net income that is retained and reinvested in the business.
The payout ratio and the retention ratio are inversely related. When the payout ratio is high, the retention ratio is low. When the payout ratio is low, the retention ratio is high.
In this case, the payout ratio is 0.45. This means that the company pays out 45% of its net income as dividends. The retention ratio is therefore 100% – 45% = 55%.
The other options are incorrect because they do not represent the correct relationship between the payout ratio and the retention ratio.